Westpac NZ CEO David McLean says attracting crucial deposit funding in this low interest rate world is 'hard', RBNZ's monetary policy is 'losing its effect'

Westpac NZ CEO David McLean says attracting crucial deposit funding in this low interest rate world is 'hard', RBNZ's monetary policy is 'losing its effect'
David McLean

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What...RBNZ screwing the elderly and savers for funds is counter productive for WESTPAC.

Surely not?.

Westpac NZ CEO David McLean says attracting crucial deposit funding in this low interest rate world is 'hard'

In a ledger banking system assets match liabilities.

Furthermore, bank deposits (liabilities/funding ) are subject to this simple logic:

A few quick notes - we’re hearing the perennial arguments about “cash on the sidelines” waiting to gush into stocks. As always, one should remember that every security that is issued in the financial markets has to be held by someone, in precisely the form it was issued as (currency, Treasury bills, commercial paper, stocks, bonds) until that security is retired. What people observe as “cash on the sidelines” is nothing other than a mountain securities that have been issued in the form of short-term money market instruments, and those instruments will remain “on the sidelines” until they are retired. In the meantime, every single one of them will have to be held by someone. They do not “flow” anywhere. They simply change hands, and changing hands doesn’t affect their quantity. Read more

Funding risk presents itself when the foreign wholesale creditors/lenders retire from rolling over and outright deny funding for existing mortgage assets. Can the domestic banks under current APRA imposed capital constraints step up to replace it with their own in house funding?

It seems ANZ is a standout as regards its position with wholesale lenders.
As of June its Derivatives were 19% of Gross Loans, compared with only 4% for the rest of the industry. Westpac's position was commendably less than 1%.
I would infer that ANZ has borrowed aggressively to make loans, likely housing loans, hence there has been no creation of deposits to match lending to that extent.
Across the industry $31B, appears as Derivatives, Perhaps that means of funding choice, mainly by ANZ, explains why Westpac are saying that attracting deposits is "hard": - there is just not as many deposits because of the $31B of Derivative funding from what would otherwise have been.
It is the rapid growth of ANZ's $22.6B of Derivatives position that likely explains why the RBNZ is having to deal with a high exchange rate.

ANZ note 10, page 21, PDF (22 of 82) - nominal outstanding derivative positions are staggering. Who are the counterparties to the IR swaps?

Westpac finds "attracting crucial deposit funding in this low interest rate world is 'hard' ". So maybe Westpac could put up the interest rate it pays depositors ? That might impact it's margin but actually we don't care one bit about that.

I hear Westpac are going around farmers and raising farmers mortgage/loan interest rates.